Vertex Energy, Inc

For the past few years, we have made material advancements and strategic decisions to grow Vertex. For the past two years, we have operated very safely and reliably while investing capital into upgrading the mobile refinery. We built in flexibility in our capital spend to allow us to redeploy our renewable equipment back into conventional production if our strategy required adjustment. Due to the significant macro headwinds for renewables over the past 12 months, many of which we believe will continue to occur over the next 18 months and beyond. We have decided to strategically pause our renewable diesel business and pivot to producing conventional fuels from the hydrocracker unit. We plan to reconfigure the hydrocracker in conjunction with a planned turnaround on the unit. When modeling the unit in conventional service against first quarter 2024 historical data, We estimate the unit could have significantly improved our results, providing an additional fuel gross margin contribution of roughly $40 million on conventional fuels. On the call today, the team and I plan to update you on the financial and operating results for the first quarter of 2024 and go into our plans around the renewable business pause and pivot. I want to start by thanking my team, all the employees listening on the call today for the good work they have accomplished thus far in 2024. As James will note shortly, our safety track record is commendable, and we have more work ahead of us to convert to all conventional feedstock, which we want to do safely because our people are our most valuable asset. With that, I'll now hand the call over to James. Thank you, Ben. Good morning, everyone. We continue to believe that our people and their safety are of the utmost importance. which is why I like to start talking about our health, safety, and environmental performance. We're proud to say that in the first quarter of 2024 was another clean quarter with zero OSHA recordable injuries. In fact, we've now operated for two years at the Mobile site without a recordable injury. We did have one minor environmental noncompliance at the Mobile site associated with the planned small unit turnaround executed during the first quarter. Additionally, Mobile saw zero process safety events, a continued streak of outstanding HSE performance at the site. I want to commend our employees at every location for continually prioritizing the safety-first mentality of our entire organization. The effort and care for each other seen across the entire business is a testament to the dedication of both employees and contract partners working within our facility. Our legacy operations overall had a good quarter with Morero performing better than budget on volume and margin. This is an accomplishment of continuous improvement in operating performance by the Morero team. Our team at the Mobile site demonstrated strong operational performance of the conventional facility during the quarter with average throughput volumes of 64,065 barrels per day for capacity utilization of 85%. which was above the high end of our guidance at 63,000 barrels per day. The higher volumes compared to guidance are primarily due to stronger capacity utilization and getting the crude unit back and cleaning ahead of schedule. Total optics per barrel for the first quarter was also below the low end of our prior guidance at $4.10 per barrel and reflects the increasing cost of things to gain from smooth operations, which more than offset the inflationary impact of lower throughput volumes and a cost per barrel basis. Our conventional fuels gross margin per barrel during the quarter rose significantly to $12.63 compared to $4.79 in the fourth quarter. Our finished products such as gasoline, diesel, and jet fuel accounted for 64% of our total product yield during the first quarter of 2024 in line with our previous guidance. In the first quarter, we had a planned small turnaround of one of the reformers and a pit stop of their number one crew unit in March. Following these successful maintenance events in March, the mobile facility was poised to operate at full rates during the second and third quarters, coincided with an expected rise in demand over the driving season. Now turning to our renewable fuels business. Vertex Renewable Diesel Plant operated smoothly, generating total renewable fuels gross margin per barrel at $10.29 for the quarter. Our renewables throughput volumes average 4,090 barrels per day for a capacity utilization of 51%, in line with our recently updated guidance. During the second quarter of 2024, in line with our pause and pivot strategy, we are pausing renewables fuels production and redirecting the hydrocracking unit to conventional fuels and products. We had a previously planned catalyst and maintenance turnaround scheduled to begin later this year for our viewables business. We will now use the planned turnaround to load a conventional catalyst and transition the unit back to conventional fuel service. This hydrocracker unit is one of the most valuable physical assets, and we have attained the full optionality of this unit through engineering efforts in conjunction with the additional capital investments made. There will be a transition period as we can reconfigure the unit and prepare it to run conventional feedstock. We are targeting startup conventional service prior to the end of the year. Following the unit startup, we expect to utilize it to further refine our existing DGO stream to an upgraded conventional product. We are optimistic that the timing of the unit coming on stream will benefit from seasonal market shifts, where typically gasoline prices dip during the winter, while diesel fees are premium due to increased heating oil demand. We'll continue to watch courage closely as we work through this process. I will now turn the call over to Chief Financial Officer Chris Carlson for a view of the company's financial results and additional details regarding our financial and operating outlook for the second quarter of 2024.

Thank you, James, and welcome to those joining us on the call today. Our focus continues to be on managing our balance sheet and liquidity. As Ben and James have outlined, our strategic decision to pause and pivot RD production is aimed at significantly enhancing this effort over the near term by stopping losses associated with renewable diesel production and adding available margins through upgrading BGO to a higher margin conventional product. We anticipate, based on near and mid-term macro pricing, that we will be able to materially generate additional cash flow allowing us greater financial flexibility and improving our balance sheet. Turning now to our financial results, we are very pleased to see improvement across the board, driven by stronger crack spreads. Vertex reported net loss attributable to the company of $17.7 million for the first quarter of 2024. This compares to a net loss of $63.9 million in the fourth quarter of 2023. We saw a $53 million improvement in our total adjusted EBITDA from a loss of $35.1 million in the fourth quarter to $18.6 million for the first quarter of 2024. During the quarter, we incurred a $15 million impact in cash flows, mostly as a result of the capex of $15 million spent during the quarter. We saw a decrease in cash from operating activities, offset by an increase in financing activities. Total capital expenditures for the first quarter of 2024 were $15 million, 29% below our prior guidance issued on February 28th, reflecting a deliberate preservation of capital achieved via a deferral of certain discretionary capital expenditures. This primarily includes a realignment of planned capital expense for the renewables business. Turning to the balance sheet, as of March 31, 2024, the company had total cash and equivalents, including restricted cash of $65.7 million and total net debt outstanding of $218.5 million at the end of the first quarter of 2024, including lease obligations of $68.1 million. We continuously monitor current market conditions and assess our expected cash generation and liquidity needs using the current forward crack spreads available. Weakening crack spreads indicate a continued need for proactively managing our liquidity position. As I stated, we believe that our strategic redirection for renewables will help our financial position. Given current market conditions, we are pursuing strategic financing opportunities to improve our balance sheet. Looking to the second quarter of 2024, we anticipate total conventional throughput volumes at Mobile to be between 68,000 and 72,000 barrels per day. Our expected yield of conventional products is expected to consist of between 64% to 68% high-value finished product. such as gasoline, diesel, and jet fuel, with the balance in intermediate and other products such as VGO. On the renewable side of the business, we are running our remaining inventories of renewable feedstock, which we believe will improve our working capital and margins for the second quarter. Once the renewable feedstock is diminished, we will use previously planned catalyst and maintenance turnaround scheduled for 2024 to load conventional catalysts and bring the unit out of turnaround into conventional service. The total cost of about $10 million was previously budgeted as part of the planned catalyst and maintenance turnaround and does not represent a material change to our forecasted capital spend. Anticipated effects per barrel encompassing both conventional and renewable spinplaces on a fully consolidated basis projected to range between $4.11 and $4.46 for the quarter. We anticipate total capital expenditures for the second quarter to be between $20 million to $25 million, which includes a portion of the $10 million conversion cost.

I'd now like to turn the call to Chief Commercial Officer Doug Hawk. Thanks, Chris. As Ben and James shared earlier,